**PYA**

****

**CORRECTION OF ERRORS THAT OCCURRED IN PREVIOUS PERIODS**

**PRIOR-PERIOD ADJUSTMENTS (FINANCIAL REPORTING) AND PRIOR-YEAR ADJUSTMENTS (BUDGETARY REPORTING)**

**PREPARED BY**

**GENERAL LEDGER AND ADVISORY BRANCH**

**FISCAL ACCOUNTING**

**BUREAU OF THE FISCAL SERVICE**

**U.S. DEPARTMENT OF TREASURY**

***Version History***

*This scenario uses information from the August 2022 U.S. Standard General Ledger, which is a Supplement to the Treasury Financial Manual (TFM) See Bulletin No.2022-16 Part 2, Section V SF 133: Report on Budget Execution and Budgetary Resources & Schedule P Budget Program and Financing Schedule and Part II, Sections I through V.*

**Background**

Occasionally, financial statements and other Treasury central accounting documents require adjustments to correct errors that occurred in previous periods. The Federal Accounting Standards Advisory Board (FASAB) and the Office of Management and Budget (OMB) provide guidance to account for these events. 

**Prior-Period Adjustments (PPAs)**

Prior-period adjustments (PPAs) may occur as a result of material corrections of errors and/or changes in accounting principles applied to an agency’s prior-year financial statements.  FASB’s Accounting Principles Board Opinion No. 20 notes that “Errors in financial statements result from mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time the financial statements were prepared.” (Par. 13) 

Statement of Federal Financial Accounting Standards (SFFAS) No. 21, *Reporting Corrections of Errors and Changes in Accounting Principles,*requires entities restate prior-period financial statements for material corrections of error(s) identified in the current period, if the statements are provided for comparative purposes, and if the effect of the error(s) would be material in either period.” “When errors are discovered after the issuance of financial statements, and if the financial statements would be materially misstated absent corrections of the errors, corrections should be made as follows:

· If only the current period statements are presented, then the cumulative effect of correcting the error should be reported as a prior period adjustment. The adjustment should be made to the beginning balance of cumulative results of operations, in the statement of changes in net position. (See SFFAS 21, Par. 10a, and Statement Presentation Table below.)

· If comparative financial statements are presented, then the error should be corrected in the earliest affected period presented by correcting any individual amounts on the financial statements.****If the earliest period presented is not the period in which the error occurred and the cumulative effect is attributable to prior periods, then the cumulative effect should be reported as a prior period adjustment. The adjustment should be made to the beginning balance of cumulative results of operations, in the statement of changes in net position for the earliest period presented. (See SFFAS 21, Par. 10b and Statement Presentation Table below.)

As a result, the Reclassified Statement of Operation and Changes in Net Position (RSOCNP) crosswalk has separate lines and USSGL accounts to distinguish between corrections of errors for the prior year (USSGL account 740000) and corrections of errors in years preceding the prior year (USSGL account 740500).

**Statement Presentation Table (for material errors only)**

 This scenario uses Prior Year Adjustment Code (PY Adj) as they are defined in the USSGL Treasury Financial Manual (TFM) which is governed by OMB Circular No. A-11.

**PY Adj Attribute Definition for GTAS Reporting**

Use when changes to obligated or unobligated balances occurred in the previous fiscal year but were not recorded in the appropriate Treasury Appropriation Fund Symbol (TAFS) as of October 1 of the current fiscal year or during the GTAS window. Exclude upward and downward adjustments to current-year/prior-year obligations and most reclassifications from clearing accounts.

**Domain Definitions**

**“B” – Adjustments to prior-year reporting - backdated in Treasury’s central accounting system**

Use when a PYA **does** affect the Fund Balance With Treasury (FBWT) and **is** backdated in Treasury’s central accounting system after the   GTAS window has closed for the period being adjusted.

**“P” – Adjustments to prior-year reporting - not backdated in Treasury’s central accounting system**

Use when a PYA does **not** affect FBWT and is **not** backdated in Treasury’s central accounting system after the GTAS window has closed for the period being adjusted.

**“X” – Not an adjustment to prior-year reporting**

Use when a PYA does not meet the requirements of domains “B” or “P” and for current-period activity. **Note:** For situations involving the GTAS revision window, and the prior-year attribute domain value “X”, refer to OMB Circular No. A-11, Appendix F, Section 15 for more detail.

**Note**: The flowchart below can assist with determining:

1) Whether or not to restate prior-year financial statements; 

2) Whether to use USSGL account 740000, “Prior-Period Adjustments Due to Corrections of Errors,” or a different account;

3) Which PY Adj attribute to use and   

4) Which financial statement the collective information impacts.

Is the event material to your agency’s financials?

Restate.

Use USSGL

account 740000/740500*

Do **not** restate. 

Use current-year USSGL.

NO

YES

~~~~
Is FBWT affected?

YES

*If you present single year statements
Please refer to OMB Circular No.-11, Appendix F, Section 15, and work with OMB and Treasury to determine if a backdated Treasury document is required.

you will only use USSGL account 740000.

If you present comparative statements

and are correcting the previous year, use 

USSGL account 740000. For correction of 

errors in years preceding the previous year, 

use USSGL account 740500.

IF REQUIRED

IF NOT REQUIRED

      Restated: Y,Y,N Transaction 3 

       Restated: Y,N Transaction 1 

 Not Restated: N,N Transaction 4

NO

Request a **backdated** Treasury document.

Use PYA attribute domain value “B.”

Do **not** request a **backdated** Treasury document.

Use PYA attribute domain value “X.”

Do **not** request a **backdated** Treasury document. 

Use PYA attribute domain value “P.”

       Restated: Y,Y,Y Transaction 2 

Not Restated: N,Y,Y Transaction 5

Not Restated: N,Y,N Transaction 6

This document provides guidance for correcting both financial and budgetary reporting errors. The following scenario assumes the activity occurs in a no-year Treasury Account Fund Symbol (TAFS). As presented graphically in the previous flowchart, there are six different possible reporting outcomes when correcting errors. The transactions, listed in the detailed chart below, correspond with the transaction numbers in the illustrative transaction section and represent each of the six possible outcomes.                                                                                                                 

DRAFT

DRAFT

**CORRECTIONS OF ERRORS THAT OCCURRED IN PREVIOUS PERIODS**

**PRIOR PERIOD ADJUSTMENTS (FINANCIAL REPORTING) AND PRIOR-YEAR ADJUSTMENTS (BUDGETARY REPORTING)**

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**Page 1 of 39                                                                                         August 2022**

**Listing of USSGL Accounts Used In This Scenario**

**Assumptions**

For the illustrative transactions that begin on page 12, assume the following:

1. The following entries in this scenario show that unapportioned authority is reclassified from the PY Adj attribute domain value “X” to the “P” or   “B” domain value when a Prior Year Adjustment transaction is processed.  Please refer to OMB Circular No. A-11, Appendix F, Section 15, and work with OMB and Treasury to determine if a backdated Treasury document is required.

2. If a backdated document is needed, the entity should complete a backdated document request located at: Backdated Treasury Documents - Budget Community - MAX Federal Community

3. Prior-period and prior-year adjustments are not standard so there will be transactions that do not have Transaction Codes listed.

4. The materiality of a transaction, with respect to restatement requirements, is known when posted.

5. The agency’s accounting system for the prior-period cannot be reopened.

6. The activity occurs in a no-year TAFS.

7. The GTAS BEA Category Indicator Attribute for illustrations purposes is discretionary.

8. The GTAS Reimbursable Flag Indicator is direct.

9. Comparative financial statements are presented.

10. Budgetary transactions highlighted in light green are prior-year activities that flow to the “Prior-year Adjustments,” column 7 of the *Financial System Activity and Trial Balance for Budgetary**Accounts* chart on page 22. 

11. Proprietary transactions highlighted in blue are PPAs that a) require financial restatement, b) flow to the “FY22 Prior-period Adjustments,” column 3 of the *Work Paper Trial Balance for Proprietary Accounts*chart on page 23 and c) are entered into the accounting system. 

12. “Work Paper Only” transactions highlighted in peach are PPAs that a) require restatement, b) flow to the “FY22 Prior-period Work-Paper Adjustments,” column 4 of the *Work Paper Trial Balance for Proprietary Accounts* chart on page 23, and c) are not entered in an agency’s accounting system. These transactions occur outside the system and are used in calculations to determine amounts to be presented in published restated financial statements and reports. When the agency’s system cannot be reopened, balances still must be impacted appropriately. However, current-period financial statements cannot be prepared directly from the agency’s accounting system. Therefore, Work Paper adjustments are necessary.  

13. All transactions not highlighted a) are current-year transactions, b) are posted in the accounting system, and c) do not fall into any of the three highlighted categories (green, blue, or peach).

**Prior-Year Trial Balances**

**Note: “X” is the Prior Year Adjustment (PYA) Attribute “X” – Not an adjustment to prior-year reporting.**

**System Preclosing Trial Balances– Fiscal 2021**

**General Fund of the U.S. Government**

**System Preclosing Trial Balances – Fiscal 2021**

## **System Post-closing Trial Balances – Fiscal 2021 / Beginning Balance – Fiscal 2022**

**Note: “X” is the Prior Year Adjustment (PYA) Attribute “X” – Not an adjustment to prior-year reporting.**

****

**General Fund of the U.S. Government**

**System Post-closing Trial Balances – Fiscal 2021 / Beginning Balances – Fiscal 2022**

****

**Note:**   Amounts in this Scenario are rounded in the thousands.

**Fiscal 2022 Accounting System Activity Summary**

(Assumes agency’s accounting system was not reopened to record PPAs or PYAs.)

**Work Paper Trial Balance for Budgetary Accounts – Statement of Budgetary Resources (SBR) ONLY**[footnoteRef:11]**** [11:  Considers FASAB Standard No. 21 requirements regarding PPAs but does not consider OMB Circular No. A-11 requirements regarding PYAs.] 

**Financial System Activity and Trial Balance for Budgetary Accounts (used to prepare SF 133/Schedule P and 2022 SBR)  [footnoteRef:12]** [12:  Includes OMB Circular No. A-11 requirements regarding PYAs. This chart is not used for the SBR.] 

**Work Paper Trial Balance for Proprietary Accounts – Restated Fiscal 2022 Comparative Financials**

## 

**Fiscal 2021 Preclosing Trial Balance Comparisons**

******Fiscal 2022 Preclosing Trial Balance Comparisons**
Differences between fiscal 2021 Published and Fiscal 2021 Work Paper for Fiscal 2021 Restated explained:

PPAs are required for material corrections of errors, and fiscal 2021 is restated for presentation in fiscal 2022 Comparative Financials. For details about the material corrections, see transactions 1, 2, and 3 and column 4 of the *Work Paper Trial Balance for Proprietary Accounts – Restated FY 21 Financials*. See fiscal 2022 trial balances for impact of PPAs on the system.    

Differences between SF 133/Schedule P and SBR explained:

PPAs are required for material corrections of errors, and fiscal 2021 statements are restated. For details about the material corrections, see transactions 1, 2, and 3 and column 4 of the *Work Paper Trial Balance for Budgetary Accounts – SBR Only*. OMB Circular No. A-11 does not permit restatement of the SF 133. OMB Circular No. A-136 requires restatement of the SBR for material corrections

Differences between SF 133/Schedule P and SBR explained:

The fiscal 2021 SBR was restated to reflect material PPAs, however, the fiscal 2021 SF 133/Schedule P was not. Also, there are different rules for determining what events/transactions qualify as PPAs to financial statements and those that qualify as PPAs to the SF 133. The SF 133/Schedule P is prepared directly from system entries, while the SBR is adjusted on the Work Paper. 

**Closing Entries for Fiscal 2022**

****

**Post-closing Trial Balances – Fiscal 2022**

Note: The Post-Closing Trial Balances (Work Paper) – Fiscal 2022 equals the Post-closing Trial Balances (System) – Fiscal 2022. 

**Post-closing Trial Balances (Work Paper) – Fiscal 2022**

**Post-closing Trial Balances (Accounting System) – Fiscal 2022**

****

*For Line 1071 to get the balance of $1,350: 420100 Beginning $4,550 + 490200 Ending (550) + 490100 Ending ($3,100) – do not include 490100 Beginning ($3,000) because $3,000 was already included in the restated amount and therefore picked up in the beginning balance. In addition, the $450 (490200X) from Transaction #3 must be added back because it was closed to 420100 and then picked up in the $4,550 balance of 420100 beginning on Line 1071, and not picked up on line 1020 of the SF133/Sch P because it had PYA “X.”

### Fiscal 2022 SF 133 STATEMENT OF BUDGETARY EXECUTION AND BUDGETARY RESOURCES & SCHEDULE P BUDGET PROGRAM AND FINANCING SCHEDULE

**Reclassified Financial Statements**

**Note: Effective FY 2021, the Reclassified Balance Sheet is the same as the Balance Sheet. Therefore, the Reclassified Balance Sheet is not presented in this scenario.**

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Page 20 of 39

**August 2022**

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